Let the debt ceiling games begin!

2015 could wind up being the best economic year for the developed world in nearly a decade.

In the U.S., hiring over the past year has been stronger than any time since the go-go 1990s. GDP growth in 2014 was the best the economy experienced since 2010. Even growth prospects in Europe are looking up in the wake of the European Central Bank’s launch of a quantitative easing plan. The ECB actually revised its growth prospects upward for once, estimating that the eurozone will grow by 1.5% this year rather than 1%.

The biggest potential risk to what looks like an accelerating recovery, however, is government. And with the government reaching an $18.1 trillion debt ceiling on Monday, Congress and the White House have a perfect opportunity to torpedo the economy. After that, the Treasury will need to resort to “extraordinary measures,” or accounting tricks to keep government debt under the statutory limit.

Chris Krueger, an analyst at Guggenheim Securities, estimates that these measures will run out sometime around October 1, which gives the Republican-controlled Congress and President Obama about six months to come to an agreement on raising the debt ceiling.

The stakes are not small. The last government shutdown—when, in 2013, Republicans refused to raise the debt ceiling unless President Obama agreed to defund Obamacare—lasted just 16 days, but it was severely damaging to the economy. The Bureau of Economic Analysis estimated that the shutdown shaved off 0.3 percentage points from economic growth in the fourth quarter of 2013. If one assumes that GDP growth and job growth go hand in hand, that means that the shutdown led to the loss of tens of thousands of jobs. A longer shutdown could be even more damaging, especially if it lasts long enough to call into question the Treasury’s ability to make interest payments to its creditors.

In an analysis issued to clients on Friday, Krueger listed six possible scenarios for Washington to reach a resolution to the impending debt-ceiling showdown:

The Republicans “cave to Obama” and raise the debt ceiling cleanly.

The GOP and the President meet in the middle on a “process-driven compromise,” meaning that they would raise the debt ceiling under the condition that there is a process set up to reduce long-term deficits. Remember the so-called “Super Committee” that the President and Congress set up back in 2011 in an effort to reach a grand bargain on long-term debt.

The president “caves” to the GOP. This scenario might be similar to 2011, when President Obama agreed to deep budget cuts known as “the sequester” in return for Congress’ vote to raise the debt ceiling.

The minting of the “platinum coin.” The Treasury is allowed to mint coins worth any amount it wishes. It could simply deposit those funds at the Federal Reserve in exchange for dollars with which it could pay U.S. government obligations.

Do nothing, or what Krueger calls the “Thelma and Louise” scenario. If Congress and the President don’t reach an agreement, the government will shut down. The U.S. could default on its debt, if it gets to the point where the U.S. stops paying interest on its debt.

Krueger, for one, believes the first scenario is most likely. The conventional wisdom is that the Republican Party suffered politically from the last shutdown, and the recent battle over Homeland Security funding ended with the GOP giving in. But things could change—six months is an eternity in politics—and the GOP might be emboldened by their electoral gains in 2014 to play hardball over the debt ceiling.

Now that Republicans control the Senate, the GOP’s hand might be stronger this time around. For instance, Congress could send a debt-prioritization bill to the President, which would ensure that U.S. debt-holders would get their interest payments no matter what. This would allow the GOP to avoid blame for a default and reduce the risk of a government shutdown.

The Treasury Department, on the other hand, argues that debt prioritization isn’t possible given the way its computer systems are designed to pay the government’s bills. As Krueger writes, “Prioritization is a very grey area.” Even if the government is able to ensure that the U.S. doesn’t technically default, the situation would “get very ugly very fast,” he says. After all, prioritization would require the government to not pay a large portion of its bills, from social security checks, medicare payments, troop salaries, or any of the many other services the Feds provide. This would deal a major blow to individual Americans and the U.S. economy.

The threat of a shutdown is one of the biggest risks facing the global economy in 2015. Let’s hope the President and Congress can learn to play nice.

“Seize the moment” is her career mantra. And now, it appears, Matthews is doing that again: by running for Congress.

Jumping on an opportunity that popped up this week—following Sen. Barbara Milkulski (D.-Md.)’s retirement plan and the just-announced intention of Rep. Chris Van Hollen (D-Md.) to vie for her open seat—Matthews will run to replace Van Hollen in the House, according to Politico.

This latest career switch makes perfect sense for Matthews, considering her rules for long-term success. She shared these three pieces of advice with Fortune last year:

1. “Push past fear and embrace change in order to keep growing. Too often women play it safe, rather than stretch past their comfort zone.”

2. “You don’t want to be a plant with a root system that has outgrown your pot. To flower and bloom, you need to keep re-potting.”

3. “Always be on the lookout for people to replace you when you do move into that bigger pot. This enables you to create a legacy, provide opportunity and pay it forward.”

Matthews was flying from Berlin to Johannesburg today and couldn’t be reached for comment. But she told Fortune last year that the move to Marriott in 2006 was “the scariest thing I ever did.” Running for office—a move that her husband, MSNBC’s Chris Matthews, considered in 2010 when he flirted with a Senate bid—could be even more daunting.

All the better, by her standards. Beyond seizing the moment, Matthews contends, you stay healthy by adapting and fearlessly changing throughout your career.

U.S. Senate fails to override Obama’s veto of Keystone XL approval

(REUTERS) — The U.S. Senate failed on Wednesday to override President Barack Obama’s veto of legislation approving the Keystone XL oil pipeline, leaving the controversial project to await an administration decision on whether to permit or deny it.

The Senate mustered just 62 votes in favor of overriding the veto, short of the two-thirds needed. Thirty-seven senators voted to sustain Obama’s veto. The Senate action means the House of Representatives will not vote on override.

Republican Senator John Hoeven said pipeline backers will try again to force Obama’s hand, by attaching Keystone approval to another bill this year.

The TransCanada Corp pipeline would carry 830,000 barrels a day of mostly Canadian oil sands crude to Nebraska en route to refineries and ports along the U.S. Gulf Coast. It has been pending for more than six years.

Republicans support building the pipeline, saying it would create jobs. Obama has questioned Keystone XL’s employment impact and raised concerns about its effects on climate change.

The struggle over whether to build Keystone escalated after Republicans won control of the Senate last year. New Senate Majority Leader Mitch McConnell said pipeline approval would be the first bill the Republican-led Congress would send to Obama.

Obama last month vetoed the bill authorizing the pipeline’s construction, saying it had bypassed a final State Department assessment on whether the project would benefit the United States. The department is handling the approval process because the pipeline would cross the U.S.-Canadian border.

Once that State Department assessment is in, expected in the coming weeks or months, Obama is expected to make a final decision on permitting for the project.

TransCanada said it was not giving up. “We look forward to the conclusion of the review period and having this project approved on its merits,” said spokesman Mark Cooper.

Environmentalists want Obama to reject Keystone because of carbon emissions involved in getting oil out of Canadian tar sands. Democratic Senator Ed Markey called it “the dirtiest oil in the world.”

The U.S. Chamber of Commerce said the project “would produce good, high-paying jobs” and “increase supplies of Canadian and American crude to refiners.”

U.S. House breaks impasse, passes security funding without provisions

(Reuters) – The House of Representatives approved full fiscal-year funding for the U.S. domestic security agency on Tuesday, dealing a blow to conservative Republicans who had wanted the bill to include language blocking President Barack Obama’s recent executive orders on immigration.

The House, in a 257-167 vote, backed a Senate-passed funding bill stripped of any immigration provisions, ending a bitter fight that raised new questions about House Speaker John Boehner’s ability to manage fractious conservatives and brought the agency within hours of a partial shutdown last week.

Obama has said he will sign the funding bill for the Department of Homeland Security, which spearheads domestic counterterrorism efforts. Spending authority for the department was scheduled to end at midnight on Friday.

After weeks of drama, Boehner was ultimately left with few – if any – viable procedural options to keep the agency open while also satisfying conservatives who wanted the funding bill to block Obama’s executive actions last year lifting the threat of deportation for millions of undocumented residents.

Senate Democrats had repeatedly blocked a House-passed bill that included the immigration provisions, while Obama and Democrats backed a “clean” funding bill passed by the Senate.

“It’s time to move forward and stop playing these silly games,” said Representative Charlie Dent, a moderatePennsylvania Republican. “Let’s prove to the American people that we’re serious about protecting this homeland and that we have the capacity to govern.”

Several Republicans said they would be better served by putting their energy into legal strategies to overturn Obama’s immigration actions, which have been put on hold by the courts.

“This is where we must focus our actions,” said Republican Representative Mike Simpson of Idaho.

CAPITULATION?

But some conservatives said the House was making a mistake by capitulating on the immigration battle.

“This is a very, very sad day,” said Republican Representative Matt Salmon of Arizona. “If we’re not going to fight now, when are we going to fight?”

On Friday, the House rejected a three-week funding extension and voted to keep the lights on at Homeland Security for one week, seeking more time to battle Obama. But Boehner told Republican House members at a meeting on Tuesday that it was time to allow a vote on the provision-free Senate bill.

“The speaker made the case that he had hoped to continue to fight for three more weeks. Obviously we didn’t win that vote last week, so we are where we are,” said Representative Luke Messer of Indiana, who chairs theRepublican Policy Committee.

“It’s disappointing. I had hoped we’d be able to continue to fight,” he said.

Boehner allowed the use of a procedural motion to bring up the Senate’s funding bill, which passed the House with support from both moderate Republicans and House Democrats.

The bill provides nearly $40 billion in funding for the agency, created after the Sept. 11, 2001 attacks, that secures U.S. borders, airports, coastal waters and other critical facilities.

Without the funding, the agency would have been forced to furlough about 30,000 employees, or about 15 percent of the agency’s workforce, but about 200,000 others would have stayed on the job without pay, including airport and border security agents.

Boehner suffered an embarrassing setback last week when conservatives rebelled against his plan for a three-week extension, but some said they did not think his ultimate failure on the issue would threaten his leadership.

“I think anybody who’s been watching this knew this is where we were going to end up back in December,” said Representative Thomas Massie, a conservative Republican from Kentucky.

The Supreme Court’s decision on health care subsidies — what you need to know

The Supreme Court is set to hear arguments Wednesday in a case that could derail the Affordable Care Act (ACA), commonly referred to as Obamacare, and potentially increase the cost of insurance for millions across the U.S. It’s a big deal, and it has insurance companies, medical providers and everyday workers holding their breath.

Here’s what you need to know about King v. Burwell before the case kicks off in the nation’s top court.

What’s the case about?

In short, it’s about the legality of insurance subsidies provided by the federal government under the ACA to only those people enrolled through federal exchanges (i.e. Healthcare.gov).

The ACA established exchanges where individuals and small businesses could buy coverage. The intention was for the states to do this on their own, but 34 states chose not to. Therefore, the federal government stepped in and launched Healthcare.gov for anyone in those particular states who wanted to shop for coverage.

The exchanges are where the subsidies come into play: the government allows for a subsidy for anyone registered through an exchange who cannot financially handle the full cost of a healthcare plan. According to the government’s interpretation of the ACA, the subsidy is available to anyone who buys insurance through any exchange, whether it was established by the federal government or a state.

The King prosecution disagree. The ACA bill states the subsidies apply to “an Exchange established by the State,” and therefore the challengers allege that anyone who purchased coverage through a federal exchange is not eligible for a subsidy. Subsidies would only apply to those who bought coverage through a state-run exchange.

What’s at stake?

If the Supreme Court rules in favor of King, it would end up leaving millions without insurance because they would not longer be able to afford the premiums, or the deductible. Last year, over 5 million people bought insurance on federal exchanges and about 87% of them qualified for subsidies. If those people opt out of buying insurance, it could end up making everyone’s healthcare a lot more expensive in the affected states.

What could happen if the subsidies are struck down?

The worst case scenario? A “death spiral” of rising insurance costs for everyone in the 34 states where federal subsidies would no longer apply, according to Simon Lazarus, senior counsel to the Constitutional Accountability Center.

Here’s how the death spiral could work: If healthy people opt out of insurance coverage because it’s not worth the price (which would be the case without subsidies for many low- and middle-income Americans), the population buying into the system would be weighted toward relatively sick people who value the coverage even at higher prices. In order to be able to afford these clients, insurance companies will raise premiums, which in turn causes more people to leave the market. The cycle would repeat itself, spiraling until insurance rates are unwieldy, even to the point where insurers leave the individual market altogether.

“People who don’t have group health policies will see premium rates skyrocket. So, many of them will decide not to hold policies.” said Lazarus. “This ‘death spiral’ happened in the 1990s, and it’s what the ACA was designed to avoid.”

In the 1990s a handful of states implemented laws that made insurers cover everyone, despite their health status, and offered no subsidies. The result was that insurance premiums skyrocketed and the number of people opting into the insurance pool went down. Sicker people continued to buy insurance even as prices grew, and more and more healthy people fled. Insurance companies abandoned the individual market in some of these states because it became financially unfeasible, and in the states where they remained, prices stayed very high.

If the subsidies disappear and a number of low-income, relatively healthy people opt out of insurance coverage, that could destabilize the market for everyone in those states. An economic forecast by the RAND Corporation estimates that prices could rise by as much as 47% and enrollment in the individual market would fall by about 70%. That means about 8 million people in the 34 affected states could become uninsured if the subsidies disappear.

Would that mean the end of Obamacare?

Not totally. The expansion of Medicaid will remain in place for all individuals who earn up to 138% of the federal poverty level, and states that established their own exchanges will not be affected. However, across more than half the U.S., the ACA will essentially be gutted.

“One thing that you’ll get is an even sharper and sadder gap in the quality of health care between relatively blue [liberal] and relatively red [conservative] states,” said Lazarus.

There are three key components of the ACA. First, the insurance reforms, which guarantee universal access to insurance despite any pre-existing conditions. Second, there is the individual mandate, which ensures there is a balanced pool of healthy and unwell subscribers. Third, there are the tax credits and subsidies that ensure everyone can afford coverage.

“Remove one leg and the whole thing falls apart,” Lazarus explained.

A ruling against the government would make the individual mandate moot in many cases, since it can be waived if a person cannot find affordable insurance, which is especially likely if the “death spiral” takes place. This could all add up to a 1990s-style implosion for states that don’t have their own exchanges pending the Supreme Court’s final decision come June.

Washington’s big business agenda is on life support

It may be too early to issue a death certificate to the big business agenda in this Congress. But suffice it to say, its vitals are faint and fading. And its condition took a turn toward critical on Friday evening, when House Republican leadership suffered their latest stunning humiliation.

For those who didn’t spend their Friday rush hour glued to C-SPAN, a recap: the House GOP’s far-right flank revolted against a plan by Speaker John Boehner (R-Ohio) to fund the Department of Homeland Security, nearly prompting a shutdown of the anti-terrorism agency. Boehner and his team managed to salvage a last-minute extension, buying leaders another week, but the source of the conservative fringe’s angst remains. That group insists on bundling the department’s funding up with measures that would gut President Obama’s post-election executive order easing deportations of illegal immigrants. Yet the strategy faces a dead-end in a still closely divided Senate, a fact that newly-installed Majority Leader Mitch McConnell (R-Ky.) has spent the last several weeks demonstrating by putting it to a series of votes, only to have Democrats block it each time. Unfortunately for Boehner, his rump faction maintains a surprisingly durable immunity to observable reality. And so the Speaker’s stuck, caught between the imperative to avoid another disastrous (partial) government shutdown and a faction that won’t accept anything less than its own maximalist terms.

How — and whether — this gets resolved this week remain uncertain propositions. But this much is already clear: If Congressional Republicans have this much trouble fulfilling their most basic charge of keeping the government up and running, the corporate lobby shouldn’t hold its breath for complex trade agreements and fundamental overhauls of the tax and immigration codes. Corporate chiefs know this. It’s why the Business Roundtable — the group representing top CEOs in Washington, whose inability to re-center the debate is the subject of a Fortune story in the current issue — has dramatically narrowed its focus to what it calls the four key pillars of growth. And first among equals on that wish list is a return to rational budgeting.

“That was priority number one,” AT&T CEO Randall Stephenson, now one year into a two-year term as the Roundtable’s chairman, told Fortune last month. “If you can at least get some period of time with some stability and regular order in Congress and the administration, then you can begin to tackle issues that really drive economic growth.”

Indeed, Republican leaders built a guarantee they’d clear that admittedly low bar into their fundraising pitches to the business class during the 2014 midterm campaign. Boehner, McConnell and their allies talked up the need to assemble a “governing majority,” buzzwords for margins large and pliant enough to allow them to work their business-friendly will. The GOP’s midterm rout delivered the numbers, giving Boehner the biggest Republican majority in the House since the 1930s while handing McConnell the keys to the Senate. And upon taking power, McConnell made explicit that Republicans would seek to build on the humble ambition, first, not to be “scary.”

Mere weeks later, any grander plans appear to have collapsed along with that one in the dust cloud of Friday’s spectacle. After all, House Republicans just showed they can’t process their own acid reflux over Obama’s immigration order without nearly shuttering a critical federal agency. So the likelihood that group will manage to craft a messy, comprehensive legislative solution to the issue and then rally around it is vanishing, at best. Ditto for tax reform. Even before the meltdown, Senate Finance Chairman Orrin Hatch (R-Utah) acknowledged the tax code rewrite he’s charged with guiding through the upper chamber is likely to take longer than two years.

That leaves trade as the last remaining hope for near-term progress on the corporate agenda. And there, again, the Friday debacle spells bad news. The business lobby is ramping up a campaign to convince lawmakers to hand Obama fast-track negotiating authority on trade deals, a piece of leverage free-traders view as key to finalizing work on the massive Pacific Rim pact known as the Trans Pacific Partnership and another with European countries. But 52 House Republicans — fifty-two, 5-2 — just proved their willingness to shame their own leaders in order to register antipathy for Obama’s use of executive authority. So how willing will the same crowd be to voluntarily hand the president a longer leash to hammer out deals with foreign governments? They won’t do it simply because the business elite make the request.

Fresh evidence of that came over the weekend, when a parade of GOP presidential prospects appearing at the right-wing Club for Growth’s winter conference all called for dismantling the Export-Import Bank. That once-sleepy federal agency, long a sidelight in the broader trade debate, has taken on outsize significance as a litmus test for Republican free-market purity; at the confab, even the Republican field’s most prominent moderate, former Florida Gov. Jeb Bush, added his support to winding down the institution. No wonder, then, that lobbyists closely tracking the trade debate in Congress say they’ll need to round up significant numbers of House Democrats to carry the issue, with varying ranges that average out around 30. And they say that so far, the allied anti-trade forces of labor and environmental groups are winning the early argument back home by raising a ruckus in the districts of fence-sitting Democrats. That fight has yet to start in earnest, but considering the atmosphere, it’s already hanging by a thread.

Barbara Mikulski, longest serving woman in Congress, to retire

U.S. Senator Barbara Mikulski of Maryland, the top Democrat on the powerful Appropriations Committee and the longest-serving female to serve in Congress, announced today that she is retiring, according to media reports.

Mikulski, 78, said she would devote her final two years in Congress working for constituents in her mid-Atlantic state, not preparing to run for another term. “Do I spend my time raising money or do I spend my time raising hell?” she said at the news conference. “Remember, for the next two years, I will be here, working the way that I do.”

Mikulski was first elected to the House of Representatives in 1977. She has served in the Senate since 1987. The Baltimore native earned a reputation for toughness and fiery outspokenness during her five terms in Washington. She is one of 20 women in the Senate, according to the Center for American Women in Politics at Rutgers.

Considered one of the more liberal members of Congress, she opposed the invasion ofIraq. She also defended government spending in an era of austerity, saying in 2012 that Congress could be “frugal without being heartless.”

That year, NASA researchers in Baltimore discovered the glimmer of an exploding star, which they named “Supernova Mikulski” after the senator.

Fortune contributed to this report. This story was updated at 12:13 pm.

Keystone XL Pipeline: Down, but certainly not out

Given the pipeline’s importance to Canada and U.S. oil producers over the long term, it really isn’t a question of if but when this pipeline will be built. But weak oil prices have given the White House political cover to drag the debate out, allowing it to use the pipeline as a bargaining chip in its negotiations with the new Republican-controlled Congress.

So, how long will the pipeline be kept in limbo? It all depends on where oil prices go from here. If they remain depressed, as they are now, Republicans will need to do some logrolling with the White House if they want approval within the next two years. But if oil prices spike and the public starts fuming at the pump, the White House may be forced to hold its nose and sign off on the deal more quickly than it would have hoped.

Believe it or not, it has been 10 years since TransCanada first proposed building the $12 billion Keystone Pipeline system. It was designed to deliver crude from Canada’s western oil fields down to U.S. refineries in the Midwest and Gulf Coast. While the project was important for Canada and its oil industry, it was hardly noticed in the U.S. Opposition from environmentalists was almost nil, as pipelines, even big ones like Keystone, were ubiquitous, safe, and heavily regulated.

Permitting and construction of the pipeline followed a normal course. The first phase of the project focused on construction of the main Keystone pipeline. It was a big one, 30-inches wide and 2147-miles long. Its route would take it through three Canadian Provinces and nine U.S. states, terminating down in southern Illinois. The pipeline would need regulatory approval from dozens of local and federal agencies, including a presidential permit from the U.S. State Department, as it crossed an international border.

Despite all the red tape, TransCanada completed the permitting process in just three years. By 2010, the pipeline was complete, pumping thousands of barrels of Canadian crude down to the U.S. It didn’t create thousands of construction jobs nor did it cause an environmental catastrophe. It was just another pipeline moving crude around the U.S.—nothing more, nothing less.

That same year, TransCanada decided to build another leg of the Keystone Pipeline, this time called the Keystone XL Pipeline. It would be shorter than the first Keystone Pipeline, at just 1,176 miles long and crossing two Canadian provinces and three U.S. states. Canadian crude production was expected to ramp up quickly in the next few years. If the pipeline wasn’t built, crude would begin to back up in Alberta, where it could be trapped, bringing big losses to the energy industry and to Canada.

While it would still need many permits, including that presidential permit, all things being equal, the XL should have been green-lit faster than its bigger brother. But, somehow, the XL became a proxy battle in the increasingly mean spirited political war in Washington between Democrats and Republicans. Suddenly, lawmakers from states nowhere near the construction zone, such as California, Massachusetts, Alabama, and Louisiana, were holding up the pipeline like it was either some sort of environmental catastrophe in the making or a critical job-creating juggernaut that would lower gasoline prices for all Americans.

The amount of time, energy, and money spent over the last five years in pushing for and against this project baffles the mind. It is just a pipeline. While it is important to get Canadian crude to market, it won’t create millions of jobs nor will it open a new hole in the ozone layer. The State Department’s environmental review of the XL released last year confirmed as much when it noted that the project was environmentally sound, especially after TransCanada rerouted the pipeline to avoid the Ogallala aquifer in Nebraska, which is a major source of drinking water for nearly two million people.

So, where do we go from here? The Canadian Natural Resource Ministry and TransCanada say they will continue fighting for the pipeline. Oil sands production in western Canada is expected to nearly double by 2020 to 3.7 million barrels a day. By 2030, it’s expected to hit 5.2 million barrels a day. That extra crude needs to move to the market, and that will be nearly impossible if the XL isn’t built. Sure, Canada is exploring pipeline alternatives to the XL that wouldn’t require approval from the U.S. government. But even if they are all built, which is a long shot at best, it is difficult to see how they will be able to move all that crude without help from the XL.

The Northern Gateway Pipeline, which would export crude to Canada’s Pacific coast, is slated to move 500,000 barrels a day, while the newly proposed Energy East pipeline, which would transport crude to Canada’s Atlantic coast, would move an extra 1.1 million barrels a day. Add that to Enbridge’s plan to expand its existing Line 3 crude pipeline by an extra 310,000 barrels a day, and you get a total of 1.9 million barrels a day of extra takeaway capacity coming out of Alberta. While that’s a large amount of oil, it is only 60% of what will be needed to meet expected crude output levels by 2030.

While some of the gap may be filled shipping the extra crude by rail, which is far more dangerous than shipping via pipeline, it is still likely to fall short. As such, the XL’s 830,000 barrel-a-day capacity looks to be key to solving Canada’s energy puzzle, making it very difficult to envision it not getting built at some point in the next 15 years or so.

At this point, the Keystone XL Pipeline’s fate depends on where oil prices go from here. The 60% slump in crude prices from last summer has taken the “urgency factor” away from the pro-pipeline camp, giving the Obama Administration more time to drag its feet on the issue. Crude production in the U.S. has stalled, so it is difficult for the Republicans to demonize the White House for its refusal to sign off on a pipeline that would deliver more foreign crude into the U.S. And low crude prices have pushed gasoline prices down to levels not seen in years, knocking energy security off the top of voters’ list of concerns.

It looks like the Obama Administration has the upper hand here, at least for the moment. It is unlikely to sign off on the XL, or anything else the Republicans want, if they feel bullied. So, the Republicans need to consider how important this issue is to them and if they are willing to make some compromises on other issues. Is it worth trading the XL for immigration reform or for promising to leave Obamacare alone? How about corporate tax reform, something that both sides actually agree on? Republican leaders say they may attach the XL to a critical spending bill to force the president’s hand, but that could backfire on them if it ends up shutting down the government. It is doubtful that leaders on either side of the aisle want a repeat of the sequester drama from a couple of years ago.

The tables could turn, though, but only if oil prices recover from recent lows. This will bring the “urgency factor” back into play. If the White House remains obstinate in the face of rising gas prices, it could reflect badly on Democrats going into the 2016 elections, especially in critical swing states like Ohio and Pennsylvania.

The last major structural hurdle in the XL debate is a State Department report on whether the pipeline is in the nation’s best interests. It is hard to envision any scenario in which they’d argue it isn’t. There is no truly substantive reason why either side should be keeping this pipeline in regulatory purgatory. Hopefully, both sides will agree is is no longer worth the headache, approve it, and move on to other truly contentious matters of state.

Senior Republicans late Tuesday signaled they would give in to President Obama’s plans for ‘net neutrality,’ paving the way for the provision of Internet services to be regulated like a public utility for the first time.

The New York Times reported South Dakota Senator John Thune as admitting that there was little prospect of getting Congress to overturn a ruling by the Federal Communications Commission on Thursday that is likely to bar companies from offering faster Internet connections at premium rates.

“We’re not going to get a signed bill that doesn’t have Democrats’ support,” the NYT quoted Thune, who is also chairman of the Senate Commerce Committee, as saying. “This is an issue that needs to have bipartisan support.”

The FCC’s five Commissioners are split on the issue, with three Democrats led by chairman Tom Wheeler all likely to vote in favor of enforcing ‘net neutrality’, while the two Republican commissioners oppose it.

However, the ruling is likely to be vigorously contested by a broad swathe of companies from Comcast Corp. ETB to IBM Corp. IBM and Verizon Communications Inc. VZ that have lobbied heavily for freedom to price their services as they see fit and argued that tighter regulation will deter investment in building out broadband internet across the country.

‘Audit the Fed’ is about power, not transparency

Janet Yellen was on Capitol Hill Tuesday for the first of two hearings in front of the Senate and House, respectively, to defend Fed policy and advise Congress.

On Tuesday, the Fed chair faced grilling from the new Republican Senate. She came prepared first and foremost to dissuade lawmakers from supporting so-called “Audit the Fed” legislation proposed by Kentucky Senator and likely presidential hopeful Rand Paul and cosponsored by 30 other legislators. The bill would, among other things, increase Congress’ ability to oversee the Fed’s interest rate decisions.

“I strongly oppose Audit the Fed,” said Yellen during questioning, arguing that it would “bring short-term political pressures to bear” on the central bank and dissuade it from making the “hard choices” needed to keep inflation in check. She said that in cases where countries have suffered from excessive inflation, the central banks managing those economies often kept monetary policy too loose due to political pressure to boost economic growth.

But if you watched Tuesday’s hearing closely, there didn’t seem to be much appetite for getting Congress involved in interest rate decisions so much as a general dissatisfaction with the distribution of power at the central bank. Republican Senator Bob Corker tossed Yellen a series of softballs on the audit question, allowing the chair to explain the degree to which its assets are already audited by independent firm Deloitte and the fact that the Fed’s balance sheet is published online.

But senators on the right and left lobbed several criticisms at the Federal Reserve. Senate Banking Committee Chair Richard Shelby began his questioning by asking for Yellen’s opinion on a recent proposal by outgoing Dallas Fed President Richard Fisher that the Fed be reorganized to make the Federal Reserve Bank of New York much less powerful and distribute that influence to other regional banks. Fisher argued that making the President of the New York Fed at all times the Vice Chairman of the Federal Reserve Board of Governors gives too much power to a regional bank that has very close ties to Wall Street’s biggest and most powerful banks.

Democratic Senator Jack Reed of Rhode Island, who recently submitted legislation that would require the President of the New York Fed to be confirmed by the Senate, echoed Shelby’s concerns. He called attention to recent media reports that suggested that regulators at the New York Fed have been successfully cowed by the very institutions they are supposed to be regulating. The Federal Reserve is reviewing whether the New York branch is in fact too close to Wall Street, but the results of that study have yet to be made public.

According to Chris Krueger, an analyst with Guggenheim Securities, Congress is more likely to take some power away from the New York Fed than it is likely to expose interest rate decisions to further oversight. In a note to clients, he writes:

It is our belief that some version of the Fisher Plan becomes the new Audit the Fed bill and it is something that the Federal Reserve Board will have much more trouble stopping because it will feed upon anti-New York/anti-mega bank bias that exists in Congress. While the Federal Reserve Board may have objections to the Fisher Plan, it is certainly more palatable than the current Rand Paul bill – and also far less likely to spook markets.